Drilling Capital for the Small ProducerWells Fargo Energy Capital, Inc.Michael NepveuxManaging Director

Williston Basin Petroleum ConferenceBismarck, North DakotaMay 22, 2012

Wells Fargo Overview

One in three households in America does business with Wells Fargo. Wells Fargo has $1.3 trillion in assets and more than 275,000 team members across 80+ business lines.

Assets

$1.3 trillion

Rank by assets

4th

Among U.S. Peers

Rank by value of stock

1st Among U.S. Peers

Rank by value of stock

3rdAmong global financial institutions

Market value of stock

$177.6 billion

Team members

270,000

Customers

More than 70 million

Fortune 500 rank

23rd Among all companies, by revenue

Total stores

More than 10,000North America

ATMs

More than 12,000#3 branded bank ATM owner

Key facts1

1 Company data as of March 31, 2012

Our vision

We want to satisfy all our customers’ financial needs, help them succeed

financially, be the premier provider of financial services in every one of our

markets, and be known as one of America’s great companies.

Wells Fargo serves consumers and businesses in more communities than any other U.S. Bank

Wells Fargo strength

Numbers in billions

Market capitalization as of 3/31/12

Source: Capital IQ

JP Morgan HSBC Citibank Bank of America

RBC Capital Markets

Goldman Sachs

US Bank UBS Barclays Deutsche Bank

Morgan Stanley

Credit Suisse

Wells Fargo Energy Group Overview

Wells Fargo Energy Group Commitments

*estimated data

$30B

Wells Fargo Energy Group Comprehensive Coverage Model

Dedicated relationship client coverage team with offices located geographically near clients

7 offices and 185+ team members in North America, including 19 in-house engineering professionals

$30B of credit committed to Clients

Relationship Manager is the primary contact into all the various solutions of the bank including:

– Credit and capital solutions

– Treasury management

– Asset management

– Risk management

– Receivables Management

– Corporate Services

– Second Lien, Mezzanine and Equity - Wells Fargo Energy Capital

Deposit products offered by Wells Fargo Bank, N.A. Member FDIC.

8

Wells Fargo has the #1 Energy Non-Investment Grade Debt Capital Markets Platform

Source: Loan Pricing Corporation, S&P/LCD, Dealogic and Wells Fargo Securities

Note: I ncludes Lead Arranged Syndicated Loans and Bookrun High Yield deals. Loan data through 12/31/11 and High Yield data through 04/11/12

$58

$54

$42

$16 $15 $14

$11

$8$7 $7

$6$3

$0

$10

$20

$30

$40

$50

$60

Wells Fargo Bank of America RBS Citi Morgan Stanley Deutsche Bank

($ in Billions)

Volume of Energy Transactions (2010 -2012 YTD)

JP Morgan Citi BankBank of America

RBC Goldman Sachs

UBSBarclays Deutsche Bank

Morgan Stanley

Credit Suisse

RBS

Wells Fargo has the #1 Energy Non-Investment Grade Debt Capital Markets Platform

($ in Millions)

Rank Institution No. of Deals Volume

1 Wells Fargo 116 $26,453.62 Bank of America 76 16,722.43 J P Morgan 75 27,110.04 BNP Paribas 63 21,396.95 RBS 23 4,174.66 BMO 18 3,238.37 Citi 15 2,865.88 RBC 14 5,340.09 Deutsche Bank 11 1,177.2

10 US Bancorp 10 839.5

Source: Loan Pricing Corporation and Wells Fargo Securities

2011 Loan Syndications –

Energy Lead Arranger

Full Credit to Bookrunners (by Deals)

Wells Fargo has the #1 Energy Non-Investment Grade Debt Capital Markets Platform

2011 High Yield Energy League Table

Book-Managed Deals (by Deals)

($ in Millions)

Rank Underwriter No. of Deals Volume

1 Wells Fargo 39 $4,994.02 Bank of America 38 4,990.03 J P Morgan 38 4,361.54 Credit Suisse 25 3,453.25 Barclays 19 2,797.96 RBC 19 2,120.97 RBS 19 2,369.48 BNP Paribas 18 1,736.49 Morgan Stanley 15 3,639.6

10 Citi 14 2,643.6

Source: Wells Fargo Securities and Dealogic

Wells Fargo has the #1 Energy Non-Investment Grade Debt Capital Markets Platform

2012 YTD High Yield Energy League Table

Book-Managed Deals (by Deals)

($ in Millions)

Rank Underwriter No. of Deals Volume

1 Wells Fargo 22 $2,750.12 Credit Suisse 20 2,807.63 J P Morgan 17 2,409.64 Citi 17 2,376.75 Bank of America 13 1,902.96 Deutsche Bank 13 1,666.37 RBC 12 1,632.68 RBS 10 1,590.99 Barclays 10 1,242.6

10 BMO 8 943.8

Source: Wells Fargo Securities and Dealogic

Wells Fargo Energy Capital Overview

Overview of Wells Fargo Energy Capital

Established in 1996 as a non-bank subsidiary of Wells Fargo & Company

Headquartered in Houston, satellite offices in Denver, Dallas and Pittsburgh

– 7 Investment professionals, 13 total staff

Provides acquisition and development capital to upstream and midstream North American oil and gas companies

– Development Drilling (Mezzanine) Loans

– Direct Equity Investments

– Joint venture capital

– Second Lien Term Loans

– Equity Fund Investments

Roughly $1.2B of active debt and equity commitments

– $600MM of Debt / $600MM of Equity

Other products include bridge facilities, volumetric production payments (VPP’s), and private placements

Few E&P mezz specialists have survived

Wells Fargo

Aquila Macquarie NGPC

Beacon Mirant Denham CIT

Cambrian Koch WilliamsPetro-bridge

LehmanGuggen-

heim

Enron KCS StratumDeutsche

BankDuke D.E. Shaw

Silver-point

Carlyle

EIG (TCW) RIMCO Torch MGTenneco /

RangeGE Capital Cargill Shell

Goldman Sachs

Gasrock Chambers

1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2011

Prepared for the 2011 IPAA Private Capital Conference by EIG (TCW) – This list is illustrative only and is not purported to be comprehensive or precise as to the dates shown.

Wells Fargo

Aquila Macquarie NGPC

Beacon Mirant Denham CIT

Cambrian Koch WilliamsPetro-bridge

LehmanGuggen-

heim

Enron KCS StratumDeutsche

BankDuke D.E. Shaw

Silver-point

Carlyle

EIG (TCW) RIMCO Torch MGTenneco /

RangeGE Capital Cargill Shell

Goldman Sachs

Gasrock Chambers

1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2011

Prepared for the 2011 IPAA Private Capital Conference by EIG (TCW) – This list is illustrative only and is not purported to be comprehensive or precise as to the dates shown.

WFEC is one of a few long term players

State Rankings of Oil Producing States

1. Texas

2. North Dakota

3. Alaska

4. California

North Dakota

North Dakota

Where Do We Fit in the Development Cycle?

Production

Start-Up Development Acquisition Development

Development Loan, Equity

Senior Revolver

Subordinated Debt, Equity

Syndicating Senior

Revolver

Risk / Return Matrix

Equity

(Public & Private)

Mezzanine Debt

(Development Drilling Loans)

Targ

et

Rate

of

Retu

rn %

5

10

15

20

25

30

35+

0

Bank Loan(Senior Debt)

Risk

HighLow

Public Debt (High Yield)

Second Lien Debt

WFB

WFEC

Definition of Mezzanine Debt

Good solution for companies who:

– Need capital to acquire and/or develop reserves

– Require more capital than commercial banks will provide

– Don’t want to sell or bring in a partner

– Want to avoid ownership dilution inherent in raising equity capital

Mezzanine (mĕz‘ ə-nēn) n. [from Latin, medianus middle, median]: An intermediate story, usually not of full width, between two main floors, especially the ground floor and the one

above it.

Energy finance translation: a middle layer of capital, typically supported to a material extent by undeveloped reserves, with equity beneath and sometimes senior debt above; not

meant to be a permanent or primary source of capital.

Features of Typical Mezzanine Drilling Projects Primarily PUD reserves, sometimes lower risk probable reserves – as may be the

case in current Bakken and Three Forks development drilling programs

Usually requires some PDP, although lower risk drilling may not

Reputable third party reserve report usually required to close, but not to start the process

Experienced operators only, or non-operating companies with real oil and gas experience

Typically the sponsor pays for leases and seismic; we pay for capital expenditures

Since take-out is frequently conforming reserve-based bank loans, must be very economic drilling programs

Mezzanine Development Drilling Loan – Typical Structure and Terms

Advancing line of credit; highly customizable; high level of lender involvement

Designed to fund 100% of capex per pre-approved development plan; loan is

funded as/when AFEs/JIBs presented to lender; may have some ability to

refinance debt or equity at closing

Recourse only to the oil and gas assets; no personal guarantees

Two year term: typically sufficient time to allow refinancing by conforming

reserve-based bank loan

Most cash flow swept monthly to repay first interest, then principal; allowances

made for G&A

Targeted all-in IRR of 15 – 25%, including coupon of Prime + 3% - 6% plus equity

kickers comprised primarily of APO NPI, possibly overrides or warrants

Some hedging may be required

Mezzanine Advantages vs. Conforming Reserve-based Bank Loans

Higher advance rates

Accelerate funding and development (Bakken translation: keep up with pad drilling and zipper fracs)

Ability to capitalize interest

Willingness to absorb significantly higher reserve risk (e.g., undeveloped reserves, well concentration, recently drilled wells)

Ability to customize for unusual situations

Greater flexibility to change /amend once the program is underway

Smaller equity contribution required

Allows substantially higher leverage versus both cash flow and equity

Mezzanine Advantages vs. Private Equity

Retain greater portion of the upside

Easier access to a lot of capital

Cheaper way to finance a lower-risk development drilling program

Maintain control of Board

Easier to exit on your chosen timing/terms

Thank youMichael Nepveux

Managing Director, Wells Fargo Energy Capital

303-863-5589

michael.nepveux@wellsfargo.com